U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-23015
RED HORSE ENTERTAINMENT CORPORATION
(Exact name of small business issuer as specified in its charter)
Nevada 87-0450232
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
11828 La Grange Avenue, Los Angeles, CA 90025
(Address of principal executive offices)
(310) 473-0213
(Issuer's telephone number)
Not Applicable
(Former name, address and fiscal year, if changed since last report)
Check whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the
preceding 12 months (or for such shorter period that the issuer
was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Check whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13, or 15(d) of the
Exchange Act subsequent to the distribution of securities under
a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's
classes of common equity, as of ___________, 2000: __________
shares of common stock.
Transitional Small Business Format: Yes [ ] No [ X ]
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FORM 10-QSB
RED HORSE ENTERTAINMENT CORPORATION
INDEX
Page
PART I. Financial Information 3
Financial Statements 4
Management's Discussion And Analysis of 12
Financial Condition or Plan of Operation
PART II. Other Information 13
Signatures 13
2
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PART I.
Item 1. Financial Information
In the opinion of management, the accompanying unaudited
financial statements included in this Form 10-QSB reflect all
adjustments (consisting only of normal recurring accruals)
necessary for a fair presentation of the results of operations
for the periods presented. The results of operations for the
periods presented are not necessarily indicative of the results
to be expected for the full year.
3
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RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Balance Sheets
ASSETS
March 31, December 31,
2000 1999
CURRENT ASSETS
Cash $ 234,751 $ 232,783
Total Current Assets 234,751 232,783
PROPERTY AND EQUIPMENT (Note 3) - -
TOTAL ASSETS $ 234,751 $ 232,783
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,594 $ 189
Total Current Liabilities 2,594 189
STOCKHOLDERS' EQUITY
Common stock: 50,000,000 shares authorized at $0.001
par value; 455,073 shares issued and outstanding 455 455
Additional paid-in capital 423,353 423,353
Deficit accumulated during the development stage (191,651) (191,214)
Total Stockholders' Equity 232,157 232,594
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 234,751 $ 232,783
See accompanying notes to the financial statements.
4
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RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Statements of Operations
From
Inception on
December 4,
For the Three Months Ended 1987 to
March 31, March 31,
2000 1999 2000
REVENUES $ - $ - $ -
EXPENSES
Bad debt expense - - 35,000
Outside services 505 1,196 9,923
Professional fees 2,752 1,911 79,577
Rent - - 6,545
Travel - - 18,336
Administrative expenses 46 2,085 28,073
Depreciation - 152 1,546
Amortization - - 472
Interest - - 418
Total Expenses 3,303 5,344 179,890
OTHER INCOME
Interest income 2,866 2,233 123,363
Total Other Income 2,866 2,233 123,363
NET LOSS BEFORE
DISCONTINUED OPERATIONS (437) (3,111) (56,527)
LOSS FROM DISCONTINUED
OPERATIONS (Note 6) - - (911,314)
GAIN ON DISPOSAL OF
DISCONTINUED OPERATIONS (Note 6) - - 776,190
NET LOSS $ (437) $ (3,111) $ (191,651)
BASIC LOSS PER SHARE $ (0.00) $ (0.01)
WEIGHTED AVERAGE SHARES
OUTSTANDING 455,073 455,073
See the accompanying notes to the financial statements.
5
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RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Statements of Cash Flows
From
Inception on
For the Three December 4,
Months Ended 1987 to
March 31, March 31,
2000 1999 2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (437) $ (3,111) $(191,651)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation - 152 1,546
Amortization - - 472
Loss on disposal of discontinued operations - - (776,190)
Changes in operating assets and liabilities:
Increase in accounts payable 2,405 - 2,594
Increase in accrued expenses - - 286,334
Net Cash Provided (Used) by Operating
Activities 1,968 (2,959) (676,895)
CASH FLOWS FROM INVESTING ACTIVITIES
Organization expenses - - (10,925)
Sale of fixed assets - - 4,000
Purchase of equipment and leasehold
improvements - - (1,255,237)
Net Cash (Used) by Investing Activities - - (1,262,162)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debentures - - 1,750,000
Proceeds from stock issuance - - 212,984
Sale warrants - - 100
Exercise of warrants - - 210,724
Net Cash Provided by Financing Activities - - 2,173,808
INCREASE IN CASH AND CASH EQUIVALENTS 1,968 (2,959) 234,751
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 232,783 232,359 -
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 234,751 $ 229,400 $ 234,751
See accompanying notes to the financial statements.
6
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RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Statements of Cash Flows (Continued)
From
Inception on
December 4,
For the Three Months Ended 1987 to
March 31, March 31,
2000 1999 2000
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $ - $ - $ 418
Cash paid for taxes $ - $ - $ -
NON-CASH INVESTING ACTIVITIES
Sale of subsidiary (Note 6) $ - $ - $ 2,023,767
See accompanying notes to the financial statements.
7
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RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
March 31, 2000 and December 31, 1999
NOTE 1 - ORGANIZATION AND CORPORATE HISTORY
The Company was incorporated in the State of Nevada on
December 4, 1987, under the name of Quantus Capital, Inc.
Since its inception it has not engaged in a significant
business activity and is considered to be a development
stage company. The articles of incorporation of the
Company state that its purpose is to engage in the
business of making investments and acquisition of assets,
properties and businesses and to engage in any an all
other lawful business.
Pursuant to a special meeting of shareholders held on
March 9, 1992, the Company made the following changes:
(1) To issue 1,556,000 shares of stock to acquire 100% of
the outstanding shares of 127 Main Street Corporation,
(the former Subsidiary) a Delaware Corporation. (2)
Adopted a plan of recapitalization whereby the issued and
outstanding shares of the Company were reverse split on a
one for five basis. The shares outstanding were reduced
from 7,780,000 to 1,556,000. (3) The articles of
incorporation were amended changing the name to Red Horse
Entertainment Corporation. All references to number of
shares have been retroactively restated to reflect the
reverse stock split.
During September 1992, the former Subsidiary began
operating a casino in Central City, Colorado,
subsequently operations were terminated (Note 6).
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Recognition of Income
The Company recognizes income and expenses on the accrual
basis of accounting. The fiscal year of the Company ends
on December 31.
b. Basic Loss Per Share
The computation of basic loss per share of common stock
is based on the weighted average number of shares issued
and outstanding during the period of the financial
statements as follows:
March 31,
2000 1999
Numerator - loss $ (437) $ (3,111)
Denominator - weighted average
number of shares outstanding 455,073 455,073
Loss per share $ (0.00) $ (0.01)
8
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RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
March 31, 2000 and December 31, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
c. Provision for Taxes
No provision for taxes has been recorded due to operating
losses at December 31, 1994, 1993 and 1992. The Company has
net operating loss carryovers for both book and tax purposes
of approximately $191,000 which expire in 2007 and 2008.
The potential tax benefit of the loss carryovers has been
offset in full by a valuation allowance.
d. Cash and Cash Equivalents
The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.
e. Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
March 31, December 31,
2000 1999
Office equipment $ 1,071 $ 1,071
Less accumulated depreciation (1,071) (1,071)
Total Property and Equipment $ - $ -
Equipment is being depreciated over eight years using the
straight-line method. Depreciation expense for the year
ending December 31, 1999 and the period ending March 31,
2000 was $152 and $-0-, respectively.
NOTE 4 - PUBLIC OFFERING
In 1988, the Company sold 38,537 units to the general
public. Each unit consisted of one share of common stock
and one "A" warrant that could be used to purchase one share
of common stock for $22.50 per share within two years of the
effective date of the offering, and one "B" warrant that
could have been used to purchase one share of common stock
for $37.50 per share, which expired November 8, 1993. The
Company received cash of $289,040 as a result of this public
offering.
9
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RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
March 31, 2000 and December 31, 1999
NOTE 5 - WARRANTS OUTSTANDING
As a result of the Company's public offering, the
underwriter purchased a warrant that entitles him to
purchase 3,853 units at a price of $9.375 per unit.
In conjunction with the Company's acquisition of 127 Main
Street Corporation, the shareholders of 127 Main Street
Corporation were granted warrants or options to purchase an
aggregate of 453,093 shares of common stock of the parent
Company for a period of five years at a price of $9.00 per
share. As of December 31, 1996, 351,212 warrants have been
exercised and the Company has received cash of $210,724.
NOTE 6 - DISCONTINUED OPERATIONS
On September 17, 1993, the Company decided to terminate the
operations of its former subsidiary, 127 Main Street
Corporation, and the casino operations located at 127 Main
Street, Central City, Colorado. Cost over runs resulting
from site conditions made it economically unfeasible to
continue operations. Consequently, the facility was
abandoned and all lease options and improvements were lost.
The following is a summary of income (loss) from operations
of 127 Main Street Corporation:
Revenue - 1992 $ 40,029
Revenue - 1993 4,982
Total Revenue 45,011
Operating expenses - 1992 670,363
Operating expenses - 1993 285,962
Total Operating Expenses 956,325
Loss from Discontinued Operations $ (911,314)
Write off of assets - 1992 $(1,246,097)
Gain on assumption of debt - 1993 2,022,287
Gain on Disposal of Discontinued Operations $ 776,190
NOTE 7 - DISPOSAL OF SUBSIDIARY - RELATED PARTY TRANSACTION
On March 19, 1994, the Company entered into a stock purchase
agreement whereby two officers of the Company purchased all
of the outstanding shares of the Company's former
subsidiary, 127 Main Street Corporation. The shares were
sold for the nominal amount of $500.
NOTE 8 - REVERSE STOCK SPLIT
On August 2, 1993, the shareholders of the Company approved
a 30-for-1 reverse stock split. The financial statements
have been restated to reflect this change retroactively to
the beginning of the periods presented.
10
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RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
March 31, 2000 and December 31, 1999
NOTE 9 - GOING CONCERN
The Company's financial statements are prepared using
generally accepted accounting principles applicable to a
going concern which contemplates the realization of
assets and liquidation of liabilities in the normal
course of business. However, the Company does not have
significant cash or other material assets, nor does it
have an established source of operating revenues
sufficient to cover its operating costs and to allow it
to continue as a going concern. It is the intent of the
Company to seek a merger with an existing, operating
company. In the interim, shareholders of the Company
have committed to meeting its minimal operating
expenses.
NOTE 10 - STOCK OPTIONS
On February 1, 1994, the Company issued options to two
of its officers, for each one to purchase 25,000 shares
of common stock at a price of 40.50 per share. The
option is for a term of five years.
NOTE 11 - CONCENTRATIONS OF RISK
The Company maintains a money market investment account
which accounts for $230,880 of the balance of cash. The
account is not insured by the FDIC, nor is it guaranteed
by the bank. The investment is subject to investment
risk, including potential principle loss.
11
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION OR PLAN OF OPERATION
Three Month periods Ended March 31, 2000 and 1999
The Company had no revenue from continuing operations for the
three-month periods ended March 31, 2000 and 1999.
General and administrative expenses for the three month periods
ended March 31, 2000 and 1999, consisted of general corporate
administration, legal and professional expenses, and accounting
and auditing costs. These expenses were $3,303 and $5,344 for
the three-month periods ended March 31, 2000 and 1999,
respectively.
Interest income in the three-month periods ended March 31, 2000
and 1999, was $2,866 and $2,233, respectively. As a result of
the foregoing factors, the Company realized a net loss of $437
for the three months ended March 31, 2000, as compared to a net
loss of $3,111 for the same period in 1999.
Liquidity and Capital Resources
At March 31, 2000, the Company had working capital of
approximately $232,157, as compared to $232,594 at December 31,
1999. Working capital as of both dates consisted substantially
of short-term investments, and cash and cash equivalents.
Although the Company's most significant assets consist largely of
cash and cash equivalents, the Company has no intent to become,
or hold itself out to be, engaged primarily in the business of
investing, reinvesting, or trading in securities. Accordingly,
the Company does not anticipate being required to register
pursuant to the Investment Company Act of 1940 and expects to be
limited in its ability to invest in securities, other than cash
equivalents and government securities, in the aggregate amount of
over 40% of its assets. There can be no assurances that any
investment made by the Company will not result in losses.
Management believes that the Company has sufficient cash and
short-term investments to meet the anticipated needs of the
Company's operations through at least the next 12 months.
However, there can be no assurances to that effect, as the
Company has no significant revenues and the Company's need for
capital may change dramatically if it acquires an interest in a
business opportunity during that period. The Company's current
operating plan is to (i) handle the administrative and reporting
requirements of a public company, and (ii) search for potential
businesses, products, technologies and companies for acquisition.
At present, the Company has no understandings, commitments or
agreements with respect to the acquisition of any business
venture, and there can be no assurance that the Company will
identify a business venture suitable for acquisition in the
future. Further, there can be no assurance that the Company
would be successful in consummating any acquisition on favorable
terms or that it will be able to profitably manage any business
venture it acquires.
Forward-Looking Statement Notice
When used in this report, the words "may," "will," "expect,"
"anticipate," "continue," "estimate," "project," "intend," and
similar expressions are intended to identify forward-looking
statements within the meaning of Section 27a of the Securities
Act of 1933 and Section 21e of the Securities Exchange Act of
1934 regarding events, conditions, and financial trends that may
affect the Company's future plans of operations, business
strategy, operating results, and financial position. Persons
reviewing this report are
12
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cautioned that any forward-looking statements are not guarantees
of future performance and are subject to risks and uncertainties
and that actual results may differ materially from those included
within the forward-looking statements as a result of various
factors. Such factors are discussed under the headings "Item 1.
Description of Business," and "Item 6. Management's Discussion
and Analysis of Financial Condition and Results of Operations,"
and also include general economic factors and conditions that may
directly or indirectly impact the Company's financial condition
or results of operations.
PART II. OTHER INFORMATION
Exhibits and Reports on Form 8-K.
Reports on Form 8-K: No reports on Form 8-K were filed by
the Company during the quarter ended March 31, 2000.
Exhibits: Included only with the electronic filing of this
report is the Financial Data Schedule for the three month period
ended March 31, 2000 (Exhibit ref. No. 27).
SIGNATURES
In accordance with the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned
thereunto duly authorized.
RED HORSE ENTERTAINMENT CORPORATION
Date: May 11, 2000 By: /s/ Jack Gertino, Secretary
13
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<PERIOD-END> MAR-31-2000
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